Will You Offer Free Shipping this Holiday Season?

Here are 6 free-shipping benefits that may sway you.

By Luke Knowles · September 25, 2012 · 19 Comments
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What if there was a single strategy that could send your sales soaring this holiday season? It would keep shoppers coming back to your site and encourage them to spend more at checkout. It would also increase your loyal customer base and have a positive impact on your bottom line. Sounds too good to be true, right? Wrong.

Though it’s not necessarily a magic bullet, offering free shipping is one of the best strategies for reaching your sales goals this holiday season. Competitive shipping deals often make or break a consumer’s decision to buy, especially during the holiday season. Offering free shipping can help online sellers achieve the following goals.

Benefit 1: Reduce shopping cart abandonment rates

Shopping cart abandonment is the most dreaded customer action by online retailers. There’s an entire industry developed around helping sellers combat it, but experts agree shipping costs are the No.1 reason shoppers choose not to go through with an order.

In fact, 44 percent of online buyers indicated high shipping costs were the reason they ditched their order pre-checkout, according to Invesp. As further proof, Internet Retailer reported last year’s Free Shipping Day had the lowest shopping cart abandonment rate during the final six months of 2011.

Last year, three out of every five online transactions between Thanksgiving and Cyber Week, the week after Thanksgiving, included free shipping

Benefit 2: Stay competitive

Everyone, from big-name retailers to one-person Etsy shops, offers discounted shipping, making it increasingly difficult for retailers to compete without it. Last year, three out of every five online transactions between Thanksgiving and Cyber Week, the week after Thanksgiving, included free shipping.

Ultimately, free shipping is becoming a necessity for retailers to stay competitive during the holiday season. Case in point: nine in 10 retailers planned to offer the service at some point during last year’s record-breaking holiday season, according to the National Retail Federation.

Benefit 3: Increase sales

Since free shipping keeps you competitive and reduces shopping cart abandonment rates, it should come as no surprise the promotion also increases sales. In a 2011 study conducted by Forrester Research, online retailers reported a 10 percent to 20 percent overall increase in revenue from free shipping offers. Additionally, TechCrunch reported orders with free shipping are, on average, 30-percent higher in value than orders that include shipping costs.

To help encourage these higher-value purchases, online sellers can establish a minimum order consumers must meet to qualify for free shipping. Though free shipping with no minimum order is the most popular version of the promotion, 70 percent of shoppers will add items to their cart to meet minimum-order requirements, according to comScore.

Benefit 4: Improve customer retention

Customer retention is an increasing challenge for online retailers thanks to instant price-comparison tools. Because shipping costs contribute to the total price of an item, reducing or eliminating them on a consistent basis will keep customers coming back. In fact, the previously mentioned study by Forrester Research indicated “half of free shipping shoppers are repeat buyers.”

Amazon is a perfect example of customer loyalty as a result of a near-constant free shipping offer. The online behemoth is credited for kick starting the nearly ubiquitous demand for free shipping with its “everyday free shipping over $25” offer.

Benefit 5: Meet annual revenue goals

The ability of a free shipping-specific shopping day to exceed $1 billion in online sales shows the power of these offers

Sales during the holiday season represent anywhere from 20 percent to 40 percent of stores’ annual revenue, making it a crucial period for retailers to meet their financial goals. Since free shipping is the top incentive for online sales, a strategically timed offer can make up for slower sales months earlier in the year.

Benefit 6: Participate in holiday shopping events

With free shipping comes free publicity. Black Friday and Cyber Monday are known to be dominating sales days, but the holiday created specifically for free shipping offers—Free Shipping Day (this year Dec. 17)—has already surpassed Black Friday, the day after Thanksgiving, in online sales, and is just behind Cyber Monday, the Monday after Thanksgiving.

The ability of a free shipping-specific shopping day to exceed $1 billion in online sales after just four years in existence shows the power of these offers. The event also provides the perfect opportunity to test the results of a new offer.

During Free Shipping Day in 2009, for example, an art gallery in Yosemite National Park doubled its daily sales. And a one-woman jewelry store processed 103 orders during the event, compared to the two to three daily orders she normally fulfills. Neither of these small-business retailers offers free shipping year-round, but they were able to boost their year-end sales by using the promotion to encourage patronage.

Luke Knowles is an Internet entrepreneur and founder of FreeShipping.org and Free Shipping Day, the one-day online event when more than 2,000 retailers offer free shipping with delivery by Christmas Eve. As the CEO of Kinoli Inc., Luke also manages a family of money-saving websites called The Frugals and created the first-ever mobile coupon app in 2009. For more information about Luke, go to www.lukeknowles.com. Opinions expressed here may not be shared by The Online Seller and/or its principals.

Hoosier Daddy

No one buys for “the holiday season.” 95% of Americans spend hundreds of billions of dollars shopping for CHRISTMAS. So, why are some merchants afraid to utter the word “Christmas”? Are they afraid that someone, somewhere might be offended if they see the name of the only national holiday in the month of December??
There is currently a four-hundred-thosand (and growing) strong boycott of businesses who advertise for our Christmas shopping dollars but refuse to use the word “Christmas” in their ads. Please join and refuse to shop at merchants who can’t bring themselves to use the word “Christmas” but only the idiots “holidays.”
In case you’re speculating, I am not a Christian. I’m agnostic but was raised Jewish. This is not about religion, it’s about American traditions.
- skrepo
  
  You do know when the word “holidays” is used that also includes New Years Day. I for the life cannot understand what the big whoop is about the word “holidays” You do know that the “holidays” was used in business and marketing since the early 1920’s but picked up speed after WWII. Like the “good ole days” especially circa 1950’s, you had aisles filled with Santa alongside Nativity scenes and baby jesus. It is not a manifestation of a godless society that conveniently came when you know who became president as some have argued with a straight face. If the word “holidays” so perturbs you, you need to rethink your priorities in life. If you are so big into tradition take a step back and look at the marketing since the 1940’s during the dreaded “holiday” season. One thing that America is great at that no one can touch us with a ten foot pole is ability to sell anything and everything for any occasion whether it is a true necessity or not. This ability does not come from a godless society but a pure capitalistic one. You can agree or disagree with capitalism but in America money is king. It was king back in the “good ole days” and it is king now.
- mfrosedew
  
  Totally agree. I think the whole don’t say Christmas is baloney. Its a free religion country not a “no religion” country. Everyone should be able to say the correct thing they are really referring to rather than the manipulative hide-behind term. Especially Merry Christmas. If someone wants to get offended at references to a holiday of some other religion not their own, they can run off to someplace that only allows their religion.
  
  Oh and also, yeah, free shipping is a great idea, its what I do all the time, but it means raising prices on the items themselves, though. For some that might be tricky.
debinTexas

So, if I offer a rock bottom price at barely nets me a profit now after I pay Ebay fees and commissions, Paypal fees, and my original purchase cost, I’ll magically net MORE if I give away shipping at Christmas, too? Or do you have a link to free shipping from USPS? Please share it. Nope, I’m not buying it.
Goodnews

I can see what you’re doing!
OK – Ebay AND Amazon have been absolutely nailed by the chinese e-commerce site Alibaba.
Instead of trying to give irrational advice,why don’t you ask Alibaba how they have managed to out do BOTH of the so called behemoths of e-commerce.
While Ebay AND Amazon have been spending all their time implimenting ways to rip their sellers off,instead of putting forward a business model that allows everyone to grow,a real GIANT has causually walked up behind them and snatched the throne out from underneath their sorry backsides.
YOU REAP WHAT YOU SOW!
Sue

Agre i sell at rock bottom prices only making 2-5% if I offer free shipping I would be out of pocket 105%.
not at all practical.
simon

Absolute Rubbish! the only people who benefit are eBay, postage costs are so high these days it would be impossible to offer free shipping, without adding the price on to the product which would then deter the customer from buying! I wonder if the people who dream theses ideas up have actually put them into practice!
‘Christmas’ should be the best sellling time of the year anyway if you have the right products.
I always read these selling tips when i fancy a good laugh because they are a real joke!
Jan

All of this research data is hog wash! Everyone knows that to offer free shipping that the price of the item goes up to cover the shipping that the seller has to pay. I sell new products and not one of my suppliers give me a shipping break. I just sold a video game system and after the ebay fees and paypals fees plus what I have to pay for the item, I made a whole $1.32 I would have to sell a thousand of these video game systems to make a thousand dollars, could ebay live on that? So, quit publishing all this data which means nothing to a seller because all of that data is just hype to get a seller to give their products away so that ebay and paypal can make their money. If ebay is so greedy for money why don’t they drop the final value fee to less than a percent so that we can make some money and lower our prices. Buyers look at only one thing and that is price, if you have the lowest price in the search engines, they buy if you are just 1 cent above the lowest price, you don’t make the sales. So if our fees were lowered, then we could lower our prices and wah lah, more money for all of us.
Skrepo

@BuildTheFence:disqus

You do know when the word “holidays” is used that also includes New
Years Day. I for the life cannot understand what the big whoop is about
the word “holidays” You do know that the “holidays” was used in business
and marketing since the early 1920’s but picked up speed after WWII.
Like the “good ole days” especially circa 1950’s, you had aisles filled
with Santa alongside Nativity scenes and baby jesus. It is not a
manifestation of a godless society that conveniently came when you know
who became president as some have argued with a straight face. If the word “holidays” so perturbs you, you need to rethink your priorities in life.
If you are so big into tradition take a step back and look at the
marketing since the 1940’s during the dreaded “holiday” season. One
thing that America is great at that no one can touch us with a ten foot
pole is ability to sell anything and everything for any occasion whether
it is a true necessity or not. This ability does not come from a
godless society but a pure capitalistic one. You can agree or disagree with capitalism but in America money is king. It was king back in the “good ole days” and it is king now.
AAA from VA

That may be a good idea for people selling new items on eBay or sell a lot of items like an eBay store. But I sell used items like vintage collectibles. eBay demands me to offer 14 day money back refund if I want to keep my rating standard. If a person changes his mine for any reason within 14 days like an extra bill came up, was given as a gift and they already have one or it was the wrong color, it broke while playing with it when given to a child or there is a slight scratch that they did not see in my detailed photos it is easy to send an item back if he or she had free shipping to receive it. If I charge shipping the person must decide if it is worth sending the item back to lose the shipping charge and lose the shipping charge to send it back to me. I ship worldwide and sometimes the shipping fee cost more than the item won. Or if I ship across the USA it cost half more than what the item won for. Some ideas are good for some people but some ideas are not good for everybody.
Tom White

I still have an issue with offering free shipping while the cost of that service varies so widely from coast to coast, Flat Rate shipping is most often far more expensive than standard Priority Mail, especially for shipments in a close by Postal zones, so it offers no real advantage. Since I would then be offering the same final cost to all customers, it would seem to me that I would be asking nearby customers to subsidize the shipping costs of those across the country, I find this issue too murky to make a quick decision.
tryinghardtomakealivingonebay

Someone who really knows, please respond….I’m curious how sellers profit with free shipping since sellers now must pay income tax on their ebay sales. Maybe the big box stores but what about the average Joe?
Shipping must be incorporated into your sales price to profit after all the sellers fees…right? This increases your total sales which leads to higher income taxes…right? Or is shipping a write-off dollar-for-dollar on our tax return? That can still bump a seller to a higher tax percent…right?
Hope to hear from a tax accountant who really knows.

PS…Hoosier Daddy ~ Thank you for your great comment below….Agreed 100%! Christmas Christmas Christmas!
- snoopy_love
  
  You can deduct shipping costs and supplies against your profits. If you combine the shipping costs into your purchase price you are still going to deduct the ACTUAL amount it cost you to ship that item so you are not taxed on the shipping amount.
sunnysammut

Both eBay and PayPal wants us to use registered postage which sometimes can take the cost of postage to around £8 depending on the weight. That is a huge chunk of the final price after deducting the free shipping it’s not worth selling. If big companies are doing this, then we might have the same scenario as the now forgotten corner shop. Small business like us will not be able to get by and the internet will be taken over by the big companies who can afford free shipping. Very sad. I say that no eBayer should list their items with free shipping if they want to continue selling on eBay in the future. Moan over
Chris

Did everybody notice that the 2 businesses mentioned sell light weight items that probably only require First Class postage?
Wink

I put the percentages of eBay and Pay Pal fees in every listing, ( in the description, in the shipping section and in additional comments. I also often post the fees in additional comments on FeedBack. I break the cost down in dollars for the specific item.
I don’t know if it makes a difference to the buyers, but at least I let them know what eBay and Pay Pal are making on the transaction. Perhaps buyers will understand that we are not gouging them.
Larrys.Trains

You’re right! Money IS king! That’s why eBay is constantly coming up with more ways to stick it to the ‘little guys’ and cleverly tries to hide it as ‘improving’ the selling experience. How many know that they also are the OWNERS of PayPal?
Think about this for just a moment……they claimed to have somewhere around 100 MILLION members on-line every day some time back. If just ONE TENTH of those members back then paid (through fees on listings) only ONE DOLLAR a day, eBay profits to the tune of TEN MILLION DOLLARS EVERY SINGLE DAY!
HOW’S THAT WORKING OUT FOR YOU?
anakinisvader

I actually started offering free shipping on my ebay store around 8 months ago. I was sick and tired of getting complaints and low ratings because I charged someone $6 shipping that actually cost me $9 to ship. I just jacked up my buy it now price to cover the shipping and fee’s. Funny thing is, my sales have gotten better. I was suprised to say the least. It may not be for everyone but it has really helped me out.
Animater9

I do know that free shipping is a good idea. On the other hand if the buyer is out of state there is NO TAX. DOES THE SHIPPING Take the place that tax would have been? E-bay and pay pal get what they want no questions asked. If we make a sale we pay them, if we dont e- bay still gets theres. If that is the case (they always get theres) why dont they pass out on that special day ( the one that is supose to give us a big boom in our bottom line) free fees to all sellers. Wouldnt that up there sales or bottom end as well. I know it is my choice to read or not to read but at that same time it is apparently my choice to post or not to post. Have a GREAT DAY AND SEASON and by the way MARRY CHRISTMAS! David hughes collectables-online.com